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Country Commercial Guides FY 2000: Estonia Report prepared by U.S. Embassy Tallinn, released July 1999 Note*

CHAPTER IV. MARKETING U.S. PRODUCTS AND SERVICES

Distribution Channels

Distribution channels in Estonia are similar to the United States market. Goods may be sold through an agent, distributor, established wholesaler, or by selling directly to retail organizations.

Privately-owned wholesale and trading houses are particularly strong in certain specialized sectors, such as electronics, electrical components and instruments, pharmaceutical and health care products, technical products and machinery, raw materials and chemicals.

Use of Agents and Distributors; Finding a Partner

One exclusive agent/distributor is usually appointed to cover the entire country. Estonian importers often represent several different product lines. In selecting a representative, the exporter should check whether that company handles competing products.

There is no clearinghouse of information for finding a partner in Estonia. It is recommended that U.S. companies seeking agents, distributors, or partners in Estonia contact local trade associations for a list of importers, purchase the Agent Distributor Service (ADS) from their nearest U.S. Department of Commerce District Office, or contact either the Estonian Investment Agency or the Commercial Section of U.S. Embassy Tallinn.

Direct Marketing

Direct Marketing is both a media and a way of selling. Direct marketing as a media includes direct mail and direct response advertising (press, radio and television). As a way of selling it covers mail order, direct selling and telemarketing. Both direct sales and mail order sales are showing a steady growth in Estonia.

Joint Ventures/Licensing

Joint ventures and licensing arrangements with foreign manufactures are allowed and encouraged. Several U.S. companies have established themselves in the Estonian market with subsidiaries and joint ventures. A number of Estonian firms are interested in using their long-established contacts in the former Soviet Union to market U.S. goods. The Estonians cite a number of selling points for using Estonia as a gateway to Russia.

Steps to Establishing an Office

Commercial operations in Estonia may be performed either as a "physical person" or a "legal person," and may be divided into four forms: 1) general partnership; 2) limited partnership; 3) limited company; and 4) a public limited company. Descriptions of the different forms and English-language guidelines on how to establish such firms in Estonia are available on the web sites of either the Estonian Investment Agency (www.eia.ee) or the Estonian Chamber of Commerce and Industry (www.koda.ee). Selling Factors/Techniques

Selling factors and techniques are very similar in Estonia to those in the United States. Terms generally applied to international trade with industrial countries apply to selling in Estonia. When selling through a local distributor financing is covered in mutual agreements. Advertising and Trade Promotion

Since January 1998 Law on Advertising has been in force, according to which advertisements should not be offensive to minorities (race, sex, etc.) Also provisions on child-related advertisements are included. Advertising of tobacco and tobacco products is prohibited, advertising of alcohol is strictly limited.

Nearly half of the advertising in Estonia is through the national and local printed press. About 26% of advertising is conducted via television, while radio, magazines and outdoor media had a total share of eight percent.

International advertising magazine "Advertising Age" has pointed out four Estonian advertising companies Inorek & Grey, Brand Sellers DDB Estonia, Bates Adell Saatchi & Saatchi and Zavod. In 1997 Inorek & Grey showed the biggest turnover of $1.4 million.

Major Estonian periodicals and their circulation are the following: Postimees (67 000), Eesti Päevaleht (36 000), S&#otilde;numileht (30 500), #otilde;htuleht (15 000), Eesti Ekspress (58 000), Äripäev (12 000).

Trade Promotion

Most of the international fairs take place at Estonian Fairs Ltd., located in Tallinn. See section E for a list of contacts.

Pricing Products

Products in Estonia are priced using the following method:

CIF price + excise tax + profit + value added tax (18%) Excise tax is levied on raw tobacco and cigarettes, cigars, cigarillos; alcohol and beer; petrol, diesel oil, jet fuel, lubricating engine oil; cars, motorcycles and yachts motor vehicles and package. Tobacco and tobacco products imported to Estonia are assessed when the excise tax tags are bought. The rate of excise duty is the price of the tax tag. The enterprises, having the national license for producing, importing and exporting of tobacco products, have the right to buy the tax tags. The excise tax is imposed on the spirits, alcoholic beverages and beer. Synthetic spirits, by-products of rectification and distilled spirits are not subject to the excise tax.

Nearly all imports, as well as domestic production, are subject to the Value Added Tax (VAT). Exemptions from VAT cover medicines, medical goods and equipment for funeral services, goods imported for non-profit purpose and some other specific goods and services the turnover of which is tax-free in Estonia.

There are no price controls in Estonia.

Sales Service/Customer Support

Major suppliers normally establish sales offices in Estonia that are supported by dealers. There are also importers/distributors who use a network of dealers to support their marketing efforts. As a rule, one exclusive agent/distributor is appointed to cover the entire country. Estonian importers often represent several different product lines. Importers may serve large customers themselves while dealers work with smaller customers and those located outside Tallinn. Training, usually arranged and carried out by dealers, is an important aspect.

Service points should cover the whole territory and not be limited to the capital.

Selling to the Government

Government procurement is governed by the Public Procurement law (January 1, 1996; amended July 1998). Conducted through open tender, government procurement may take place in one of two ways: 1) limited bidding with negotiations, or 2) a government tender open to all bidders. The law regulates public procurement that exceeds $14 500, new construction which exceeds $144 300, or the preparation of a construction site or construction services for more than $36 100. As provided for by the law in case contra versus occur with international agreements entered by the Republic of Estonia, the provisions of the agreement prevail.

Sources of Information - Announcements concerning public procurement are through Public Procurement Office and published in daily newspapers. See section E. for a list of contacts.

Protecting Your Product from IPR Infringement

The Estonian legal system protects property rights, including intellectual property. The Copyright Law was established in 1992. The Trademark Law, the Patent Law, and the Utility Model Law were all established in 1994. Estonia adheres to the Bern Convention, the Geneva Convention on the Protection of Phonograms, the Parish Convention, the Patent Cooperation Treaty, the NICE Agreement, the Budapest Treaty on the International Recognition of the Deposit of Microorganisms, WIPO, TRIPS and the Rome Convention. A law amending the copyright law and criminal code was adopted in 1998. It complies with the EU directives granting protection to authors, performing artists, record producers, and broadcasting organizations.

It is recommended that U.S. firms desiring to register their patent or trademark seek the assistance of a reputable attorney experienced in IPR issues. The Association of Estonian Patent Attorneys (EPS) has a list of 25 certified patent attorneys. See section E. for a list of contacts. Copyrights: Copyrights are valid for the lifetime of the artist plus 50 years. There is no application process for nor formal bestowal of copyrights -- it is automatic upon creation of the work.

Patents: Patents are granted for 20 years. Application is made at the Estonian Patent Office. Estonia also accepts patent applications (translated into Estonian) from abroad.

Trademarks: Applications must be made to the Estonian Patent Office. English language guidelines to apply for a trademark are available from the Estonian Patent Office (see Appendix E).

Utility Models: Only a device can serve as a subject of a utility model. An application for the registration of utility model can be based on a pending patent application. English language information for registering a utility model may be obtained from the Estonian Patent Office (see Appendix E). Need for Local Attorney

The use of local attorneys is recommended for U.S. firms planning to operate in Estonia or enter into contracts with Estonian companies. An updated list of Estonian attorneys can be obtained from the American Embassy, Consular Section, Kentmanni 20, 15099 Tallinn, Estonia, tel: 372 6312 021, fax: 372 6312 025.